Greetings and welcome to Matthews International Second Quarter Fiscal Year 2022 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Wilson, Senior Director of Corporate Development. Thank you, sir, you may begin.

Thank you, Christine. Good morning everyone and welcome to the Matthews International second quarter fiscal year 2022 earnings conference call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolacci, President and Chief Executive Officer, and Steve Nicola, our Chief Financial Officer. Before we start, I would like to remind you that our earnings release was posted on our website, www.matw.com, in the Investors section last night. The presentation for our call can also be accessed in the Investors section of the website. In addition, as a reminder, beginning in the first quarter of fiscal 2022 the company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technology segment. Prior period results reflect the new segmentation. As a reminder, any forward-looking statements in connection with this discussion are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors that could cause the company’s results to differ from those discussed today are set forth in the company’s Annual Report on Form 10-K and other periodic filings with the SEC. In addition, we will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. In connection with any forward-looking statements and non-GAAP financial information, please read the disclaimer included in today’s presentation materials located on our website. And now I will turn the call over to Steve.

Thank you, Bill. Good morning. In reviewing our results for the fiscal 2022 second quarter some of the key highlights included. First, we reported a record for quarterly sales and another consecutive quarter of year-over-year consolidated sales growth. Consolidated sales increased to $445 million for the current quarter compared to $417.2 million a year ago, representing an increase of $27.8 million or 6.7%. Each of our business segments reported sales growth for the quarter. Second, the company's industrial technology segment, which includes the energy solutions, warehouse automation, and product identification businesses reported sales of $78.2 million for the fiscal 2022 second quarter compared to $65.3 million last year, representing an increase of $12.9 million or almost 20%. Adjusted EBITDA for this segment grew to $14.4 million compared to $8.3 million last year. These increases were mainly driven by continued growth in our energy solutions business and higher warehouse automation and product identification sales. Third, with respect to consolidated adjusted EBITDA, the benefit of higher consolidated sales was significantly mitigated by the unfavorable impact of increased material costs as well as other inflationary impacts including increased labor and freight costs. Fourth, the company reported an $83.1 million reduction in the outstanding debt balance during the fiscal 2022 second quarter. As a result, the company's net debt, which represents debt less cash, was below $700 million as of March 31, 2022. During the quarter the company replaced its existing receivables securitization facility with a receivables purchase agreement. This resulted in $75 million reductions in trade receivables and debt. Next I'll provide a summary of our key earnings metrics on a GAAP and non-GAAP adjusted basis for the quarter ended March 31, 2022. On a GAAP basis, the company reported a net loss of $1.9 million or $0.06 per share compared to net income of $5 million or $0.16 per share for the same quarter last year. GAAP earnings for the current quarter included asset write-downs totaling $10.5 million related to the Russia-Ukraine conflict. In addition, both periods reflected the impact of intangible amortization expense primarily from the acceleration of amortization of certain intangible assets in the SGK Brand Solutions segment. Consolidated intangible amortization expense was $12 million or $0.28 per share for the fiscal 2022 second quarter compared to $22.9 million or $0.52 per share a year ago. On a non-GAAP basis, adjusted EBITDA, which represents net income before interest expense, income taxes, depreciation and amortization, and other adjustments for the fiscal 2022 second quarter was $55.2 million compared to $60.9 million last year. The benefit of the company's consolidated sales growth was offset for the quarter primarily by higher material costs and increased labor and freight costs. In addition, the current quarter was impacted by unfavorable sales mix in the SGK Brand Solutions segment. Adjusted earnings per share were $0.74 for the current quarter compared to $0.89 last year, primarily reflecting the reduction in adjusted EBITDA. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share in our earnings release. For the six months ended March 31, 2022 consolidated sales increased $883.6 million compared to $803.8 million a year ago, representing an increase of $79.7 million or almost 10%. Similar to the results for the second quarter, each of our business segments reported sales growth on a year-to-date basis. On a GAAP basis, the company reported a year-to-date net loss of $21.7 million or $0.68 per share compared to net income of $3.2 million or $0.10 per share last year. GAAP earnings for the current year included non-service pension costs of $31.4 million, which is predominantly related to the settlement of the company's principal pension plans. In addition, as I noted earlier, the second quarter of this year included asset write-downs totaling $10.5 million related to the Russia-Ukraine conflict. Both year-to-date periods reflected the impact of accelerated intangible amortization expense. Consolidated intangible amortization expense was $33.5 million or $0.79 per share for the first six months of fiscal 2022 compared to $38.2 million or $0.88 per share a year ago. On a non-GAAP basis, adjusted EBITDA for the six months ended March 31, 2022 was $108.5 million compared to $115.7 million last year. The benefit of the company's consolidated sales growth was offset primarily by higher material costs and increased labor and freight costs. In addition, the current year was impacted by unfavorable sales mix in the SGK Brand Solutions segment. Year-to-date adjusted earnings per share was $1.48 as of March 31, 2022 compared to $1.57 last year, primarily reflecting a reduction in adjusted EBITDA. The decline was partially offset by lower interest expense in the current year. Investment income for the quarter ended March 31, 2022 was a loss of $327,000 compared to an income of $1 million for the same quarter a year ago. Investment income for the six months ended March 31, 2022 was $676,000 compared to $2 million last year. Investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plans. Interest expense for the fiscal 2022 second quarter was $6.3 million compared to $7.2 million a year ago. Year-to-date interest expense was $12.8 million for fiscal 2022 compared to $15 million last year. The declines reflected lower average debt levels and lower average interest rates for the current year. Other income and deductions net for the quarter ended March 31, 2022 represented pre-tax income of $562,000 compared with net expense of $2.6 million a year ago. The significant change primarily reflected a reduction in non-service pension costs as a result of the company's settlement of its principal pension plan. Year-to-date other income and deductions net for fiscal 2022 represented net expense of $31.2 million compared to net expense of $4.3 million last year. The year-to-date change primarily reflected a significant first quarter charge in the current year as a result of the settlement of the company's principal pension plan. Other income and deductions include the non-service portion of pension and post-retirement costs as well as banking related fees and the impact of currency revaluation of gains and losses on foreign denominated cash and debt balances. The company's consolidated income taxes for the quarter ended March 31, 2022 were $3.3 million compared to $972,000 a year ago. The significant increase for the current quarter primarily reflected the impact of the nondeductible asset write-downs related to the Russia-Ukraine conflict. For the six months ended March 31, 2022, the company's consolidated income taxes reflected a benefit of $3.4 million compared to an expense of $5 million last year. The benefit for the current year primarily reflected the tax benefits of the first quarter pension cost. Please turn to Slide 5 to begin a review of our segment results. Sales for the Industrial Technology segment were $78.2 million for the fiscal 2022 second quarter compared to $65.3 million a year ago, representing an increase of $12.9 million or approximately 20%. The growth resulted primarily from higher sales for the energy storage solutions business. In addition, warehouse automation and product identification sales improved for the quarter. Backlog and incoming order rates for these businesses continue to be strong through the fiscal 2022 second quarter. Year-to-date sales for the industrial technology segment were $152.5 million for March 31, 2022 compared to $118.7 million a year ago, representing an increase of $33.8 million or approximately 28.5%. As a result of this sales growth, adjusted EBITDA for the Industrial Technology segment was $14.4 million for the fiscal 2022 second quarter compared with $8.3 million a year ago. The increase also reflected improved margins and lower pension costs which were partially offset by higher labor costs. On a year-to-date basis, adjusted EBITDA for the Industrial Technology segment nearly doubled to $21.6 million compared with $11.3 million last year. Please turn to Slide 6. Memorialization segment sales for the fiscal 2022 second quarter were $220 million compared to $205.5 million a year ago, representing an increase of $14.5 million or 7.1%. The growth was primarily the result of higher cemetery memorial product sales and increased prices. Casket unit sales volumes were slightly lower for the current quarter as the impact of COVID-19 begins to subside. The company also completed an acquisition of a small cemetery products business during fiscal 2021 second quarter. For the first six months of fiscal 2022 memorialization segment sales were $430.7 million compared to $388.7 million a year ago, representing an increase of $42 million or 10.8%. Higher unit volumes of caskets and cemetery memorial products, in addition to increased prices, were the primary drivers of the year-to-date sales improvement. Memorialization segment adjusted EBITDA for the fiscal 2022 second quarter was $42.9 million compared to $51.6 million a year ago. The favorable effect of higher sales was offset by the significant unfavorable impact of higher material costs, mainly steel, lumber, and bronze compared to a year ago, as well as increased labor and freight costs. Memorialization segment adjusted EBITDA for the six months ended March 31, 2022 was $86.3 million compared to $95.7 million last year. Please turn to Slide 7. Sales for the SGK Brand Solutions segment improved to $146.8 million for the quarter ended March 31, 2022 compared to $146.4 million a year ago, representing an increase primarily reflected higher merchandising related sales and growth in the segment's European packaging business. These increases were significantly offset by changes in foreign currency rates which had an unfavorable impact of $7 million on the segment's current quarter sales compared with the same quarter last year. Year-to-date sales for the SGK Brand Solutions segment were $300.4 million for fiscal 2022 compared to $296.4 million last year. Similar to the second quarter, sales growth from our merchandising business and our brand packaging business in Asia was significantly offset by unfavorable currency rate changes. These changes had an unfavorable impact of $9.4 million on the segment's current year sales compared to last year. Fiscal 2022 second quarter adjusted EBITDA for the SGK Brand Solutions segment was $13.5 million compared to $18.4 million a year ago. The decline primarily reflected the impact of an unfavorable change in sales mix from a year ago, increased labor cost, new client onboarding costs, and higher travel and entertainment expenses. The segment sales mix for the current quarter reflected a reduction in higher margin agency and photography related sales which were offset by increased merchandising sales. In addition, production inefficiencies related to remote work environments impacted operating margins for the quarter. Adjusted EBITDA for the SGK Brand Solutions segment was $28.9 million for the first six months of fiscal 2022 compared to $40.2 million last year. Please turn to Slide 8. Outstanding debt was $753 million at March 31, 2022, compared to $836.1 million at the end of the first quarter and $763.7 million at September 30, 2021. Net debt, calculated as debt minus cash at March 31, 2022, was $699.2 million, and our net leverage ratio was 3.2. The leverage covenant ratio in our domestic credit facility is based on net debt. A significant portion of the debt reduction resulted from replacing our existing securitization facility with the receivables purchase agreement, which led to a reduction in our debt and trade receivables balance. It is important to note that since the pandemic began, we have reduced our outstanding debt balance by over $200 million and our accrued pension balance by over $100 million. Cash flow provided by operating activities for the fiscal 2022 second quarter was almost $100 million compared to $56.9 million a year ago. The increase primarily reflected the sale of trade receivables totaling $75 million under the company's new receivables purchase agreement that I just noted. Cash flow provided by operating activities for the six months ended March 31, 2022 was $72.7 million compared to $92.2 million last year. This change included the contributions of the company's principal pension plan during the fiscal 2022 first quarter in connection with the plan's termination and settlements. Approximately 31.3 million shares were outstanding at March 31, 2022. During the recent quarter the company purchased approximately 289,000 shares under a share repurchase program. At March 31, 2022 the company had remaining authorization of approximately 2.3 million shares under the program. Finally, the Board yesterday declared a dividend of $0.22 per share on the company's common stock. The dividend is payable May 23, 2022 for stockholders of record May 9, 2022. This concludes the financial review, and Joe will now comment on our company's operations.

Thank you, Steve. Good morning. We are pleased with our second quarter financial results despite the obvious challenges; continued supply chain challenges, negative currency movement, rapidly rising costs, and the war in Ukraine combined to make an otherwise strong quarter more challenging. Despite those challenges we delivered good results overall and exceptionally strong results in several of our businesses. Each of our segments reported higher revenue than the prior year, allowing us to report another record revenue for the quarter. Our revenue growth was both volume and price driven as all businesses have raised prices to mitigate the inflationary pressures. While, as you all know, the timing of our price increases doesn't always match up with the increases in our costs. The price increases in the Memorialization segment will help mitigate the declining volumes resulting from the lower COVID-related deaths. Again this quarter I want to highlight a particularly strong performance in our recast industrial technology segment which reported almost 20% revenue growth and almost a 75% increase in EBITDA versus the prior year. Although your energy storage business was the largest driver of this performance, automation and our product identification business continued their strong performance and also delivered significant year-over-year improvement as well. As you are aware, this segment represents our fastest growing businesses. We expect these businesses to have an exceptional year with revenues on track to approach $300 million as our backlog in this segment alone still remains over $200 million. Interest in our energy storage business remains strong, particularly in our proprietary dry electrode technology. We are in continuing discussions with some of the world's largest auto industry participants who are seeking us out due to our demonstrated ability to produce dry electrode production level equipment. We believe that dry electrode battery production will be the next generation of batteries to enter the market for many reasons, but most importantly dry electrodes offer a significantly lower capital cost and a small footprint to produce compared to wet electrodes. We are very well positioned in this market with almost a decade of experience, know-how, and intellectual property. Our Memorialization segment continued strong top line performance, particularly in cemetery and funeral products, was offset by rising commodity, labor, and freight costs. All of these businesses raised prices significantly, further action may be necessary in the future to mitigate costs like higher labor which are becoming a more permanent part of our cost structure. In SGK, the team continues to deliver top line organic growth but was challenged by currency changes during the quarter. In addition to currency, EBITDA was impacted by significant product mix shifts and inflationary pressures affecting both our businesses and those of our most important consumer product companies. As I am sure you've heard, this earnings season several CPG clients have softened marketing spend resulting in lower volume for SGK as they looked to offset the rising commodity costs in their own businesses. SGK has also implemented pricing actions to offset the rising cost of labor. During the quarter we also took further action to reduce our debt, bringing our total debt reduction during the two years of the pandemic to over $200 million. Further, as I stated last quarter, we terminated our U.S. defined benefit plan and paid out the benefits to our retirees and employees. This reduced our pension plans since the start of the pandemic by over $100 million. In total we have reduced total company obligations and debt by over $300 million to the benefit of our shareholders since the beginning of the pandemic. We are satisfied with our operating performance for the quarter and confident in our ability to continue to deliver solid results. As we look to the balance of the year, there is still even more uncertainty than before. Inflationary pressures do not appear to be subsiding. The war in Ukraine is causing concerns throughout Europe where we have a significant presence, particularly with SGK. Also significant changes in currency rates are impacting our expectations for the balance of the year. All these factors and more make predicting our performance for the balance of the year very difficult. Despite these challenges, our current estimates remain strong thanks to our strong backlogs in many of our businesses and the pricing actions taken to date. As a result, we continue to believe that we can deliver at least $220 million of EBITDA on a full-year basis. If not for some of the uncertainties that we see, including the currency fluctuations, we would expect even better results but for now this is our best estimate. Now let's open it up to questions.

Thank you. Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Thank you. Good morning Joe, good morning Steve. Maybe start with Industrial Technologies where margins were clearly a standout. Maybe talk about some of the drivers there, obviously mix was favorable to some extent, but if we could kind of dig in a little bit more and just talk about the sustainability of the margins you have generated in this quarter?

As I mentioned in my comments, each of the businesses performed well, showing significant year-over-year improvement. Volume is crucial for our bottom line performance. We expect all these businesses to maintain this level of profitability and performance for the remainder of the year. I noted that we are approaching $300 million in this segment with nearly $60 million in EBITDA. We have been discussing this for several years, and I believe we are just getting started. These results do not yet reflect our new product, which we are confident will enter the market at the end of this calendar year in our product identification business.

Very helpful. And then maybe switching to Memorialization. I think you said funeral home product volumes were down slightly, not a surprise obviously given the extremely difficult comp. Just trying to get a sense of how quickly volumes are returning to more normal levels on that side of the Memorialization business?

The volumes are returning to normal levels, and have been for over a month now. One potential misunderstanding is that the pricing actions we've implemented will effectively address the volume declines. Additionally, we have very strong backlogs in our cemetery products business, and we anticipate another robust year in that segment.

Got it. As a follow-up, regarding the delay in pricing relative to inflationary pressures, when can we expect margins to begin trending back to more normal levels in that business? I'll get back in the queue. Thanks.

I anticipate that some pricing actions taken during the second quarter will only yield benefits for part of this quarter, but we expect to see those benefits increase as we move forward. Given our current cost structures, we anticipate further pricing actions throughout the year. Therefore, while your expectations for margins may vary, I believe we will start to observe improvements towards the end of the year, even though volumes and revenues will continue to be high.

Understood. Okay. Thanks, will jump back with a couple of follow ups.

Our next question comes from the line of Liam Burke with B. Riley. Please proceed with your question.

Thank you. Good morning, Joe. Good morning, Steve.

Hi, Liam.

Joe, could you talk a bit about cremation systems in the Memorialization segment? It wasn't mentioned in any of your comments. How are the sales and how does the backlog look there?

So when we talk about our human cremation with our units, we're strong. Our order rates remain strong or elevated. Elevated or as we're having some difficulty in the supply chain side of things, getting things out. But we expect that to be a good contributor over the balance of the year and into next year as well.

Great, and what assets had to be written down as a result of the Ukraine conflict?

Yeah, Liam, I'll take that one. We have a facility in Russia that serves primarily the tobacco market in Russia in our SGK business.

Okay. And I'm presuming it's uncertain how that's going to shake out?

Yeah, we've taken actions to eliminate that at this point in time. Obviously, the facility is still there; whether it ever comes back online or not is another story.

Well, I guess my question is, can you work around that, right? I mean, it's pretty sudden for you, through no fault of your own?

Yeah, well, obviously, the tobacco companies still exist, and they were producing product for other parts of Europe from there as well. We expect that that volume will just be shifted to other locations. But there have been disruptions.

Great, okay. Thanks, Joe. Thanks, Steve.

Our next question comes from the line of Chris McGinnis with Sidoti. Please proceed with your question.

Good morning. Thanks for taking my question.

Good morning.

If you could just start maybe with the inflationary environment related to lithium. Could you just talk about is that helping drive more customers in order to seek you out and your option out? Could you just talk a little bit about that dynamic? Thanks.

I want to clarify that we don't manufacture the battery, so my feedback will be limited to anecdotal observations. However, any developments that decrease the overall costs of producing lithium-ion batteries will be positive, especially as the prices of raw materials rise. Our dry electrode solution, along with its other advantages, offers a reduced production cost. As lithium prices and other associated raw material costs increase, manufacturers will seek ways to lower their production expenses, and our solution could be beneficial for us.

And I guess, this conversation since last quarter to this quarter, has it increased, stayed the same? I mean, can you just give a little bit of color on that? Thank you.

We're currently in talks with multiple auto manufacturers and OEM part producers. These discussions are ongoing, and there is interest in both our wet and dry electrode technologies, although there are some timing uncertainties regarding their rollout. We're still selling machines that serve as precursors to production equipment, as customers work on their own battery solutions. The level of interest in our offerings has remained very strong, especially following the trade shows we've attended. We're optimistic about the future, although the path may not be straightforward. I believe that this will evolve into a successful and engaging business in the mid to long term.

Great, I appreciate it. Just a couple more questions around industrial. Just with automation, are you running into any supply chain issues in getting product? I was talking to a company yesterday where it's over a year out to get some of the equipment. Can you just talk about ramping that business and the expectation there going forward?

Yes, there are definitely supply chain challenges. In our warehouse automation segment, we sell both software and hardware to companies nationwide. While we don't face major issues within our own business, our customers, who deal with components like conveyors and sorters, are experiencing difficulties in obtaining the necessary hardware that we integrate our software with. This has led to delays in installations and hindered our ability to recognize revenue from products. We do have a strong backlog in this area. Regarding product identification, the team is facing challenges with components, such as the wafers for our new products and circuit boards for product drivers. They've managed to find some alternative solutions, but it’s not ideal. This situation is contributing to the over $200 million backlog in that segment.

Appreciate that, Joe. And one just last one on the product identification. I mean, it sounds really confident that next year it is going to be a big year for you. Can you just talk about the stage of where you're at with the customer? Are they starting to receive it? Can you just provide a little bit more color around identification? Thanks.

So, I would tell you we are in beta plus with respect to our new product. The product has been out there for months; it is performing exactly as we expected, in some cases better. Our movement, from what I would call lab production of a silicon chip is going well. We are moving that production line to a Teledyne Fab Lab. That fab lab has been very, very, very instrumental for us to understand what our ongoing capabilities are in terms of cost structure, effectiveness, and volumes and we remain bullish. I mean, is it going to be again, we caution that this is not going to be like we're going to launch it tomorrow; we're going to overtake the world. But the value proposition we have expected is coming true.

Okay, great. I appreciate it. Then Steve, a question for you just around the inflationary environment and then FX. Maybe can you just talk about the impact, maybe FX on the economic quarter, and then just kind of maybe the outlook in general?

Sure, yeah. The impact on EBITDA for the quarter is, I'd say, somewhere around $2 million to $3 million range in total. But from a revenue perspective on a consolidated basis, it was over $11 million. So it certainly had a top line impact, Chris. And as I mentioned before, the impact of the SGK segment, particularly because when you look at the absolute reported growth in their top line, it reports very small. But you have to keep in mind that there was a $7 million top line headwind in that business that masks some growth particularly on the merchandising side of that business.

I appreciate that.

And Chris I'm sorry, the second part of your question.

It was just I guess the impact when you look at your guidance going out there as well. I mean, it feels like it would have been a little bit stronger if not given the inflation and then also obviously the FX?

Yeah, there's no question about that. I mean, from a bottom line standpoint, our results would have been significantly better but for the inflation. On a topline standpoint, the interesting thing about that, we saw that Steve says $11 million plus or minus on a currency fluctuation largely impacting the SGK side of the business. What is disappointing in that it reflects what we've been talking about for a while, which has been some client wins that are ramping up as we speak that would otherwise have been masked by the currency changes we're seeing. We don't know where it's going and I can tell you today is the 29th of April, and the Euro is further degraded from where it was before. Where that finishes out the year, it's difficult to tell. So we're not in the currency business, but it's not helpful.

Sure, I understand. Thanks for taking my questions and good luck for the next quarter. Thank you.

Thank you.

Our next question comes from line of Justin Bergner with Gabelli Funds. Please proceed with your question.

Good morning, Joe. Good morning, Steve.

Good morning.

Apologies, I got on the call a little late. So I may ask questions on areas you've covered. But just to clarify, I guess the last line of questioning. So the currency impact was 11 million in terms of revenue and $2 million to $3 million EBITDA, you mentioned inflation?

No inflation, I mean, let's put it this way, when we said inflation, obviously, inflation is impacting our bottom line more than we had anticipated. But pricing action is not fully implemented just yet.

Okay, but the actual 11 million, 2 million to 3 million that was currency that was not…

That's hard, that’s a hard number.

That's correct.

Inflation is much higher than that I expect.

Got it. I guess secondly, just in the SGK business, could you just if you haven't already maybe just talk through what's strong and what's challenged in that business looking into the second half?

We are noticing that some of the largest consumer packaged goods companies are reducing their marketing expenditures mainly in North America and Europe in response to rising commodity costs. This is the reality they are facing as they try to maintain profitability by cutting costs, which presented challenges for us this quarter. Looking ahead, it's difficult to determine if this situation will last; we believe marketing is cyclical and tends to fluctuate. However, we are witnessing strong retail experiences; as we've mentioned, the reopening trend is revitalizing. We anticipate this will continue throughout the year. Additionally, we are observing a recovery in our private label business as retailers, particularly grocers, are getting their supply chains back on track and refocusing on rebranding or remarketing products. While we expect a slight decline, we are optimistic about a recovery with the CPGs in the next quarter or two. We anticipate stronger results this year in our merchandising and brand experience business, along with our private label business, compared to last year.

Got it. And when you talk about merchandising, that's synonymous with retail?

Yeah, it is retail. We look at retail in two foreign private label, which is the product on the shelf that is owned by the retailer as well as in-store marketing and experiences, things like we do some work for some relatively large brands that are really in-store displays and marketing efforts inside the store.

Got it. Alright, great. And then you did 108.5 million of EBITDA in the first half; your guide is still better than 220 million. So it seems like you have some headwinds in the second half in parts of your business. Maybe just what gets better to offset those headwinds and deliver a second half that's slightly better than the first half?

If you had asked me that question in January, we would have projected a slightly better outcome. However, currency fluctuations have been unfavorable, and we are uncertain about how currency will affect us for the rest of the year. We also need assurance that we can deliver some of the larger energy products during the second half of the year, which is not entirely within our control. The construction of facilities and customer readiness to receive products have posed significant challenges across various sectors, including energy and warehousing, as well as in some cremation services. Customer readiness is crucial for us to recognize revenue if we haven’t managed to fulfill all conditions.

Got it. That's helpful. One or two more questions, if I may. The step up in sequential margins in your industrial technologies business. Clearly, you alluded to that as part of I think your annual outlook in some prior comments, but was that expected? What triggered that? Is that…?

As expected, here is the best way to frame that. It relates to the last question you asked. It is anticipated and we hope that it is sustainable. The issue is not so much about us. It's about the timing of customer readiness. As I mentioned before, we have very strong backlogs in our warehouse automation business, where the issue really is that the warehouse is ready to accept software. We are usually the last player to come into a new warehouse or a reconfigured warehouse. Our software is implemented over the underlying hardware, but the hardware needs to be in place first. These are the kinds of challenges we are facing that do not reflect the quality of the business or the kind of revenues and profitability we expect. It's all about timing.

Got it. So it seems like there was a favorable mix impact in the EBITDA margin for this quarter but not unexpected?

I assure you that the entire business has been significantly better than what I would call greater than expected inflationary pressures.

Got it. And then lastly, you talked about I think securitizing some receivables. I'm assuming those went off balance sheet. Is that the correct interpretation and can you share that number or should I just wait for the queue?

No, Justin, that's entirely correct. In the past, we had a receivable securitization facility in place. We have now replaced that with a receivables purchase agreement, which is still debt secured by receivables. However, it has no economic cost impact on us; the cost of that debt remains the same. The key difference is that it takes the receivables and related debt off the balance sheet, and this quarter, that reduction had an impact of $75 million.

Great. Thanks for taking all my questions.

You're welcome.

Our next question is a follow-up from Daniel Moore with CJS Securities. Please proceed with your question.

Thank you, again, just as a follow up to that last one as it relates to cash flow. Obviously the EBITDA guide in $220 million range is still the goal. How does that translate, how do you see that translating to cash flow from ops or free cash flow inclusive or exclusive of the $75 million receivable that you just mentioned, just trying to get a sense of your view for cash generation for the year? Thanks.

Sure, Dan. Yeah, so it's interesting this year because when you look at the $220 million adjusted EBITDA number relative to a year ago, if that's your reference point for cash flow, and the cash flow estimates, the receivable securitization actually serves to mitigate a couple of things. One, if you recall, we made a $35 million plus contribution to our pension plan in the first quarter. So that mitigates the impact of some of that on the balance sheet and reported debt. And secondly, as you've been seeing in our cash flow information, first quarter of this year, and as we talked about, we are expecting a higher level of capital expenditure this year. So I would use those factors in modeling out the cash flow for the year.

Got it. Thank you.

We have no further questions at this time. Mr. Wilson, I would like to turn the floor back over to you for closing comments.

Thank you, Christine. Thank you for joining us today and your interest in Matthews. For additional information about the company and our financial results, please contact me or visit our website. Enjoy the rest of your day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.